What to Make of the Month

Well, January could have been worse. The month started as an absolute bloodbath and finished with some roses.

How? I'm not sure how.

MBIA CFO pulled off a dozy. The company announced huge quarterly loss, announced that they did not think they would lose their AAA rating (which is still in doubt), and even if they did they would stand to lose $100-200 million. And the market rallied on this news.

Not that the math made sense. The company wrote off $2.3 billion in losses. It also announced that it was getting a $500 million injection from private equity firm Warburg Pincus,

Somehow, it sounds like swing hard and hope type of ideas.

The also saw a lot of the Fed this month.

We are starting to see a fledging refinance boom recently. Actually, a lot of people are hoping to be able to refinance and just aren't seeing the rates low enough right now. Most are thinking that rates will be down in the next couple of weeks. I really don't know. We are definitely going to see what shakes out with employment and get a better read on how aggressive the Fed is going to be.

I have seen reports of possibly just one more .25% cut in March or April and then backing off. I have seen an analyst report stating that the Fed will have to cut rates back down to the 1% level seen with the Greenspan Fed. I do not believe the Fed can afford to drop rates to that level with inflation still there. The Fed says that inflation should moderate over the coming months, but give no reason why. What is going to cause the moderation? I don't see a catalyst to that side.

When Greenspan cut the rates to that level there was no major threats to inflation. Remember, they were concerned about deflation at that time. This is a totally different world picture. We see other economies such as Europe, China, and Brazil raising rates fighting the raise of inflation.

I look to see another .50% to 1% cut off the current rate.